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Amazon accounts for the majority of Q3 online sales growth

December 12, 2016 04:26 PM

Many large publicly traded retailers posted big gains in web sales in the third quarter of 2016, driving e-commerce growth in the United States during the period. But the gains are largely attributable to e-retail giant Amazon.com Inc.

Internet Retailer’s exclusive quarterly financial report for the third quarter shows that the 32 publicly held companies that break out e-commerce sales on a quarterly basis grew 22.5% in the quarter to $41.32 billion, up from $33.73 billion in the same period of 2015. By comparison, the U.S. Commerce Department reports that total e-retail sales for the quarter grew by 15.6%. That suggests that the publicly traded online retailers outperformed the rest of the industry, thereby grabbing market share.

But a closer look reveals that Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide, accounted for 81.7% of the quarter’s web revenue growth reported by the 32 publicly held web merchants tracked in the report. Including sales of its own products and the commissions and fees it receives from marketplace sellers, Amazon’s third quarter revenue increased 26.7% to $29.48 billion from $23.27 billion a year ago. That figure does not include revenue from its cloud storage service, Amazon Web Services, which totaled $3.23 billion during the quarter, Amazon reported in October.

Furthermore, an analysis of the total value of goods transacted on Amazon suggests that Amazon likely accounted for more than half of all e-retail growth in Q3. Amazon does not disclose the value of sales on its e-commerce sites in its quarterly earnings results. But one close follower of online marketplaces, Scot Wingo, executive chairman of e-commerce technology provider ChannelAdvisor Corp., estimates the total value of goods sold on Amazon’s site in the U.S. at $33.75 billion, up from $26.92 billion a year ago. Based on those figures, Amazon’s sales accounted for 54.0% of the quarter’s online sales reported by the U.S. Commerce Department.

Factoring out Amazon’s sales, the other 31 public e-retailers in the report grew web sales just 13.3%. What’s more, excluding Amazon, 13 of the e-retailers in the study grew faster than the 13% average growth, with web merchants like Ulta Beauty (No. 153) and Wayfair Inc. (No. 24) exceeding the 50% rate, while 18 grew slower than the average, including four that suffered web sales declines in the quarter.

Some say this growth rate may not be a good sign for retailers that aren’t Amazon.

"The 13% growth rate for retailers that aren’t Amazon was over 20% a few years ago, so this means growth is slowing," says Eric Roth, managing director at Lazard Middle Market LLC. “We’re living in an Amazon world of price transparency, so companies selling online should think carefully about how they can differentiate themselves.”

Retailers can distinguish themselves from Amazon, and perhaps accelerate growth further, by creating their own unique brands that are difficult to comparison shop, Roth says. What some of the largest retailers in the report are doing to make online and mobile shopping even more appealing and compete more effectively with Amazon is updating technology and tying their various sales channels more closely together, particularly stores with their online and mobile websites and apps.

In “E-Retail Quarterly Financial Spotlight,” Internet Retailer delves into what publicly-traded retailers are doing to boost e-commerce sales and analyzes the latest financial results of some of the largest e-commerce merchants, including revenue, net income, mobile commerce and gross merchandise value. The analysis breaks down retailers by merchant type, such as retail chains and web-only retailers. The report also reviews the financials of nine technology and service providers that primarily serve the e-commerce Industry. Additionally, an exclusive Internet Retailer Online Retail Stock Index shows how investors view the health of the e-commerce industry, compared with the broader stock market.